Santa and his elves aren’t the only ones scurrying around as the year quickly winds down. Insurance brokers also are keeping busy making sure their clients are ready for the Jan. 1 implementation of the employer mandate under the Patient Protection and Affordable Care Act.

“The ACA is one law with a million permutations,” says Fred Garfield, senior vice president of employee benefits for The Horton Group in Orland Park, Illinois. “It’s like a chess match, with every move leading to a counter-move.”

Much has been written and discussed about the impact of the mandate on businesses, employees and their families. However, it also affects the role of brokers and how they interact with clients.

“The biggest change we have found is that we are not just selling insurance,” Garfield says. “This is something we do 12 months a year. Everything we do is exactly what we have been doing for the past 30 years, but with different guardrails.”

Smart brokers have thoroughly educated themselves about the mandate so they in turn can help inform their clients.

“With larger businesses that are subject to the mandate, if brokers are not experts on the employer mandate, they need to stop whatever they are doing, do some studying and become experts,” says Rick Lindquist, president of Zane Benefits Inc. in Murray, Utah. “If not, another broker will come along who knows what they are talking about.”

Partnership approach

There always have been two general groups of brokers — the vast majority, who look at themselves as strategic business partners, and a handful who consider themselves to be simply vendors.

“I’ve always seen our role as consultants and advisors to employers,” Garfield says. “The mandate has not changed this, but it has changed their appreciation of what we bring to the table. We bring resources about compliance with this bill and how it affects their business. Deals based on price are struggling, and businesses need good benefits to recruit and retain employees. This is what we do.”

If anything, the mandate is a catalyst for brokers and employers to work in closer partnership.

“Employers look for us to be an advocate, compliance advisor and shopping resource,” he says. “We want to fill all of those shoes. We’re doing everything we can do to ease the burden on our clients.”

Lindquist agrees that PPACA has forced brokers to step up their games.

“There are two ways to gain expertise,” he says. “The first is to partner with a CPA who works with their clients and collaborate. CPAs are an excellent resource for compliance information. The second way is to make sure they themselves know the law inside and out.

“I have seen both approaches work, but I wouldn’t want to be the broker who doesn’t have a plan. This is not a popular view, but if you want to understand the mandate, you have to go to the source, which is the Internal Revenue Service.”

The employer mandate is simply too complex for most human resource professionals to understand unless they dedicate most or all of their time to it.

“There may be as many as four to six different options within a plan, where in the past they used to struggle with just two options,” Garfield says. “It’s become more of a compliance issue now, with another layer of work we do for them, along with finding the right vendors and tools. Being a broker is not just about the sale; it’s a year-round job.”

Another hurdle is knowing how to correctly apply the mandate in a variety of employment statuses, from full- or part-time to temporary or seasonal.

“We have a lot of clients who have large, variable-hour staffs, such as hotels, restaurants and the hospitality industry in general,” Garfield says. “Many of them have been very generous with their benefits in the past, but these new rules force them to make difficult business decisions. We help them create new offerings and platforms.”

Zane Benefits, for example, helps clients weigh the option of paying the non-compliance penalty and helping employees move from group to individual plans.

Working together

How can employers maximize their broker’s expertise? For one thing, they can look to them for reliable information to clear the confusion.

“Our industry has almost been like cable TV, coming at people from a million directions on the same topics,” Garfield says. “We have the same message, but the interpretation may be different.”

A trusted broker can steer employers away from shortsighted decisions.

“A lot of employers are open to hearing about shortcuts to save them money,” he says. “There is a bit of a food fight among brokers, some who are less prepared and some who look at it as a way to work in options that may or may not be viable.”

They also can turn to their broker to keep an eye on the long term while they focus on the immediacy of the mandate.

“I think the biggest takeaway for employers is to understand that the employer mandate will be a multiyear cost to their business, and that is how to budget it,” Lindquist says. “Many businesses are looking at a one-year plan, but they need to include increased costs every year.”

The best advice may be to do what is best not only for the bottom line but for a business’s most valuable asset — its workforce.

“The employer mandate is meant to provide benefits in the most effective and tax-efficient manner,” Garfield says. “Look at your employees as family and do the right thing, even if it it’s not the cheapest or easiest. Doing it right is the most cost-effective and appropriate strategy for employers.”

The Internal Revenue Service has clarified that employers will not escape taxes and penalties under the Affordable Care Act if they choose to send their employees to the exchanges and reimburse them with tax-free dollars for premiums in lieu of offering an employee-sponsored health insurance plan.

In a frequently-asked-questions post to its website this month, the IRS now says such arrangements are considered, under IRS Notice 2013-54, employer payment plans that qualify as group health plans and are subject to the market reforms. The IRS has also clarified that such arrangements cannot be integrated with individual policies to satisfy the employer mandate.

The IRS clarification is directed as much at benefit advisers and agents as it is at employers, since, according to one industry lawyer, the FAQ was prompted by consultants and brokers selling pre-tax reimbursement plans to employers in defiance of the IRSâ€™ direction.

The FAQ â€œinforms employers they cannot sponsor a reimbursement arrangement that reimburses on a pre-tax basis an employeeâ€™s purchase of an insurance plan both inside and outside of the exchange,â€ says Christopher Condeluci, a benefits attorney with Venable LLP.

He adds: â€œIt puts employers on notice that if they buy an arrangement like this from a consultant or adviser they will be subject to an excise tax; and it informs benefit advisers, brokers, agents and consultants that it would be in their best interest not to recommend these types of policies.â€

An employer is permitted to give contributions, however, in the form of taxable wages, to help an employee purchase an individual market plan, Condeluci says.

Employers with fewer than 50 full-time equivalent employees are not subject to the employer mandate and, therefore, will not be penalized for discontinuing a health plan and giving their employees taxable wages to purchase an individual market plan. If the employee is eligible based on income they could also access a premium subsidy.

Large employers that fail to offer coverage may be subject to hefty fines under the ACA starting in 2015. The employer mandate for companies with 50 to 99 workers doesnâ€™t become effective until 2016.

On Sept. 13, 2013, the IRS issuedÂ Notice 2013-54, which explains how the ACA market reforms apply to certain types of group health plans, including health reimbursement arrangements, health flexible spending arrangements and certain other employer health care arrangements, including arrangements under which an employer reimburses an employee for some or all of the premium expenses incurred for an individual health insurance policy.